Bills Digest No. 201 1997-98 Stevedoring Levy (Collection) Bill 1998

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

The Government's stated aim in introducing the
Stevedoring Levy (Collection) Bill 1998 (the Collection Bill) and
the Stevedoring Levy (Imposition) Bill 1998 (the Imposition Bill)
is to underpin proposed administrative arrangements that will
improve productivity in the stevedoring industry.

The Government has asserted that the cost of the
levy will be carried exclusively by the stevedoring companies and
not passed on to shippers or to users of stevedoring services,
consumers or taxpayers.(1)

Readers will be aware that this Bill and the
related measure were introduced within 24 hours of Patrick
Operations Pty Ltd (Patrick Operations) terminating the labour
supply agreements with four Patrick employer companies which
employed 1400 members of the Maritime Union of Australia (MUA).

As recognised by the Federal(2) and High
Courts(3), the latter action was itself facilitated by the
restructuring of the Patrick Group of companies that occurred
without the knowledge of the MUA and its members in or about
September 1997.

In essence the September 1997 restructure of the
Patrick Group saw the four Patrick employer companies, which had
till then been trading profitably, sell all their assets to their
parent company then called Patrick Stevedores ESD Pty Ltd,
subsequently named Patrick Stevedores Operations No.2 Pty Ltd and
presently Patrick Operations. Through a series of asset sales and
share buy-backs, the four labour hire companies were left with
limited operating funds and only one asset. That asset was labour
supply agreements with Patrick Operations. Those agreements could
be terminated with minimal notice in the event that the employment
companies could not maintain labour supply.(4)

Labour supply was interrupted by a series of
industrial disputes perhaps not entirely unconnected with the
Patrick Group's decision, announced in late January 1998, to
transfer their right to operate stevedoring activities at No.5 Webb
Dock to companies associated with the National Farmers Federation
(NFF). This step was itself seen as the latest in a series of
attempts post March 1996 to end (by direct action) what the
Productivity Commission has described as the MUA's role as the 'de
facto sole supplier of labour' at the majority of Australian
container facilities.(5) [Others have been more blunt and described
these arrangements as a 'closed shop' and alleged that compulsory
unionism continues to operate on the docks contrary to the
provisions of the Workplace Relations Act 1996 (WR
Act).]

Patrick Operations' action in terminating the
labour supply agreements was followed by the removal of the MUA
workers, the closure of some Patrick's facilities and the
engagement of a new workforce supplied by nine other companies
including the NFF backed P&C Stevedoring. Simultaneously on the
evening of 7 April 1998, MUA members were removed from Patrick's
facilities and each of the Patrick employer companies appointed
administrators under Part 5.3A of the Corporations
Law.

Readers will also be aware that Patrick
Operations actions' of 7 April 1998 were the subject of a series of
court actions which, in broad terms, resulted in orders being
issued to all the relevant parties to restore as far as practicable
the position as it existed prior to the termination of the labour
supply agreements on 7 April 1998.(6)

High Court decision

A detailed summary of the issues before the
Court is beyond the scope of this brief as many of the Court's main
findings have little direct bearing the fate of the Bills dealt
with here. However, for future reference, it is worth signposting
some of the more significant dates and findings whilst noting that
at the time of writing this matter appears to have some
considerable distance left to run.

The High Court's decision was on challenges to
the orders of the Full Court of the Federal Court of Australia
handed down by Wilcox, von Doussa and Finkelstein JJ on 23 April
1998. (The Full Court had itself made minor variations to orders
made in respect of these matters by North J in the Federal Court on
21 April 1998.)

The Federal Court orders were stayed by Hayne J
of the High Court late on Thursday 23 April 1998 pending hearing of
the application for leave to appeal by the High Court. That stay
remained in place until the Full Bench of the High Court delivered
its judgment at 11.30am on Monday 4 May 1998.

The High Court, by a 6-1 majority, granted the
application for special leave to appeal but by the same margin
rejected the appeal by Patricks Operations and made an order for
costs in favour of the MUA respondents in relation to the High
Court appeal.

On the issue of the Federal Court orders, by a
5-2 majority the High Court upheld the bulk of the orders but made
a number of refinements and clarifications. Gaudron J would have
upheld the Federal Court orders and simply rejected Patrick
Operations special leave to appeal application. Callinan J would
have allowed the appeal against the orders under challenge and
awarded costs against the union respondents.

The appeal raised a number of complex
jurisdictional and procedural issues. However, whilst the Court
considered some substantive matters of industrial law and corporate
law, as these were appeals against orders made in interlocutory
proceedings, not all issues were argued in full and some further
facts and points of law may be raised and argued out in related
proceedings. In short, the High Court was not seeking to reach
final determinations on all the substantive matters at the heart of
the dispute between Patrick Operations and others and the MUA.

The principal effect of the High Court decision
was, as noted above, to restore as closely as possible the position
of the parties to the situation that prevailed on 7 April 1998
prior to Patrick Operations terminating the services of the four
Patrick employer (labour hire) companies.

The High Court made it plain that it is for the
Administrators of the four labour hire companies to determine
whether or not they would recommence trading within the terms and
conditions laid down in the orders of the Federal Court as modified
by the High Court.

This was the crucial finding, serving to
underline the fact that the Administrators may not succeed in
returning the four employer companies to a position of solvency.
The profitability of the labour hire companies will depend on the
productivity of the MUA workforce and a range of other factors
including the willingness of others to continue to do business with
the Patrick Group and the terms of the labour hire agreements
themselves.

On 5 May 1998 the Administrators of the four
labour hire companies, after extensive consultations with the
parties and the Commonwealth, indicated that they proposed to
recommence trading.

The Administrators indicated to Minister Reith
on 5 May 1998 that they intend to keep the companies in
administration until 25 May 1998 or thereabouts and would decide
before then whether to liquidate the companies or continue trading
under a Deed of Arrangement.(7)

According to AAP sources, the
Administrators had said, after an earlier meeting with Minister
Reith, that a Deed of Arrangement was only likely with funding for
redundancies from the Federal Government and that such funding was
only to be made available where the companies met the Government's
reform criteria.(8)

By the evening of Friday 8 May waterside workers
had returned to a number of Patrick's terminals and subsequently to
the Fremantle terminal on 10 May 1998. However, information on the
return to work is sketchy and some reports are contradictory.

On 7 May 1998 Patrick announced that it would
not recommence operations in Burnie, Bell Bay, Port Kembla,
Newcastle, Port Alma (Rockhampton), Geraldton and Adelaide. Patrick
has stated that they would not be re-opening the ports '1/4 until
they are viable, until the union accepts productive manning
levels.'(9)

It was reported that waterside workers had
returned to work at Burnie and Bell Bay on 8 May 1998.(10)

The latest information available as at COB 11
May 1998 is that the following Patrick port facilities are not
operating: Port Kembla, Newcastle, Port Alma, Adelaide, Mackay,
Devonport and Hobart. Only the Adelaide operation is a confirmed
permanent closure with 45 jobs lost. The Adelaide closure is a
decision of Patrick Operations and flows from the fact that the
High Court's orders do not compel Patrick Operations to continue
trading. (11)

A report in The Age on 11 May 1998
quoted the Administrators in charge of the Patrick employer
companies as saying that no work was available for 600 of the 1400
workers affected by the decision to recommence trading after the
High Court's decision.

On 9 May 1998, it was reported that Patrick
expected that the backlog of 10 000 containers which had built up
during the dispute would be removed in the following 3
days.(12)

Further complicating the picture, on Thursday 7
May 1998, Patrick Operations served notice on the Administrators of
the labour hire companies that it intended terminating its labour
supply contract by 21 May 1998.(13) On 11 May 1998 AAP
reported that co-Administrator, Peter Brook, would be having talks
later that day with Mr Chris Corrigan, the head of the Patrick
stevedores group, on the matter which the former says might again
lead to MUA members being thrown out of work.

Reports also suggest that up to four companies
have offered to buy the Patrick labour hire companies employing the
union workers. Commenting on the proposed sale co-Administrator,
Bill Butterell, said he had received three or four offers from
potential buyers seeking to gain the companies' 'one tangible
asset' - contracts to supply labour to Patrick Operations - but
that the Administrators would only sell the labour supply contracts
if the companies were put into liquidation.' He added that:

[w]e could sell now - we have the right to sell,
but I don't think it is a position we would take. I don't think we
would see this as being in the forefront of the creditors' [which
include the employees] interests.

The same report went on to note that negotiating
a Deed of Arrangement that would make the companies viable by
gaining Federal Government guarantees to fund redundancy payouts,
in return for a commitment to waterfront reform, remained the
Administrator's preferred option. This, however, depended on
brokering a deal agreeable to the MUA, the Federal Government and a
consortium of seven banks owed about $270 million by the Patrick
Group.(14)

Redundancies

Press estimates suggest that significant numbers
of redundancies amongst the MUA members employed by the Patrick
labour hire companies are unavoidable with estimates ranging from
200 to about 700.

Stories have subsequently emerged that the other
major stevedore, P&O, is planning to 'take on' the MUA by axing
450 jobs from its operations. Of these, 100 jobs were reported as
being affected by the possible out-sourcing of P&O's cleaning
contracts and some other non-stevedoring services.(15) The same
reports quote MUA National Secretary, John Coombs, as being unaware
of the detail of the reported proposal which is linked to scheduled
enterprise bargaining discussions between P&O and the MUA.

According to AAP, Minister Reith
responded to the above reports by quickly backing P&O's
reported plans 'to retrench some of its unionised workforce, saying
that there was significant overmanning on the docks.'(16) In
another AAP report, however, P&O Stevedores Chairman,
Richard Hein, denied that the company was seeking 450 redundancies.
He reportedly also described claims that the company was prepared
to use the provisions of the Workplace Relations Act such as
lock-outs and non-union replacements during strikes if negotiations
were unsuccessful as a journalist's 'speculation'.(17)

The proposed Government sponsored redundancy
arrangements are predicated on three key assumptions: (a) general
overmanning in the industry;(18) (b) Government sponsorship of the
scheme will serve the wider community interest;(19) and (c) that
the Patrick labour hire companies are not in a position to fund the
redundancies themselves.(20)

Patrick Redundancies

As a result of the above events, the case of the
Patrick Group and its employees is somewhat different and arguably
more critical than that of the remainder of the industry.

The proposed levy scheme in practice applies
only to two companies P&O stevedores and Patrick's, and, in
respect of the latter, the Minister has made a number of general
remarks regarding ending what he sees as uncompetitive practices in
the labour market.(21) He has also had direct discussions with the
Administrators concerning the application or otherwise of the
Government's proposed redundancy scheme to the employees of the
labour hire companies (see above).

As was recognised by the Federal Court and the
High Court, the restructuring of the Patrick Group in September
1997 (and subsequent industrial disputation) has significantly
affected the fortunes of the companies and the workers employed by
them.

It is apposite to note the views expressed by
Callinan J who observed that the accounting information before the
Federal Court and the High Court on the state of the Patrick
companies was 'incomplete', and 'to a large extent
unexplained'.(22) His Honour's comments were directed towards the
drawing of any conclusion as to why Patrick had restructured its
operations and, in that respect, were not supported by the other
judges. Nonetheless, there is much to be said for the view that the
full account of Patrick's affairs is yet to emerge.

On the state of the employer company finances
and the extent of monies owing to the MUA's members, the following
information can be gleaned from the various judgements in the High
Court case mentioned above.

As a result of the September 1997 restructuring somewhere
between $60 million and $70 million of the capital of the employer
companies, which would otherwise have been available to finance
their business operations, was returned to shareholders.

The shareholders' funds in the employer companies were reduced
to about $2.5 million by the restructure and those funds were
exhausted by April 1998.

The employer companies were said to be owed an amount of $16
million or $17 million by other companies in the Patrick Group.
However, those funds were unavailable to the employer companies
when the Group's financiers gave notice of a crystallisation of a
charge over that debt on 7 April 1998.(23)

The employees are the major creditors of the Patrick employer
companies.(24)

As far as can be established from the available (1996) balance
sheets the employer companies had made provision for current
employee entitlements (such as long service leave, annual leave
etc) totalling about $19 million. The provisions for non-current
employee entitlements added a further $14.5 million.(25)

Gaudron J further noted in respect of the
employer companies' liabilities that:

It was not disputed that (as at 7 April 1998), if the Patrick
employees were to be dismissed, either because there was no work
for them or, else, no funds to pay them, that would result in a
liability in respect of accrued leave entitlements and severance
pay in the order of $125 million.(26)

From Callinan J's judgment we learn that:

The sale of the business assets of the four employer companies
to Patrick Operations in September 1997 was for approximately $315
million with the price paid struck in accordance with a valuation
of the Patrick Group made by a firm of accountants, Price
Waterhouse Corporate Finance, in late 1996.(27) The receipt of such
independent advice would tend to suggest that it the Directors of
various companies discharged their duties in respect of conducting
the asset sale in accordance with the best interests of their
respective shareholders.

Independently of this we know that the
Administrators would not recommence trading until they secured an
injection of funds and that $3.65 million was provided by the
Patrick Group after the High Court's decision on 4 May
1998.(28)

The employees gave undertakings to the Federal
Court that can be seen as making a contribution to refloating the
employer companies. Those undertakings were that, as an interim
measure, wage claims against the employer companies would not be
made to the extent necessary for the employer companies to resume
trading profitably.(29) (As interpreted by the High Court, the
undertaking by the employees not to claim wages during an initial
period of trading did not alter the fact that the companies
themselves remain liable for wages - the MUA undertaking as to
wages only protects the Administrators.)(30)

If the employer companies cannot be rescued, the
company will go into liquidation and its assets will be realised
and the proceeds distributed amongst the creditors in the manner
prescribed by the Corporations Law. Employee entitlements
are paid out in priority to the debts of third parties.

Clearly, then, the employees have an interest in
one or more of four outcomes:

A successful return to trading of the employer/labour hire
companies;

A successful claim against the Patrick Group for all
outstanding entitlements;

A full redundancy payment under the Government's proposed
redundancy scheme; and

An action for damages against any of the parties named in the
conspiracy actions and other tort actions that are to be heard by
North J in the Federal Court.

Given that some Patrick facilities have now
closed whilst others have returned to operation, at least some of
the 1400 MUA members who were locked-out of their work places from
7 April 1998 will have a considerable interest in the present
Bill.

The likelihood of the employer companies
returning to solvent trading is, as noted above, dependent on a
number of factors other than the performance of the restored
workforce. An improved performance from those workers who actually
return to work is probably a necessary, but not necessarily
sufficient, pre-condition for the employer companies trading
successfully. Loss of contracts and the closing of some Patrick
facilities will impact on the companies' overall performance in
ways which are not easy to predict.

North J provides some further indication of the
prospects of success if some degree of mutual co-operation can be
attained. His Honour notes that the four employer companies prior
to their restructuring in 1997 had recorded significant profits in
the previous two financial years.(31) Further, His Honour's
decision records that for the first two months of 1998 the
restructured employment companies operated close to thee break-even
point despite some industrial action.(32) This would appear to
suggest that a co-operative approach would still allow the employer
companies to return to solvent trading. (Whether this is the most
economically efficient or industrially effective outcome is another
matter.)

Waterfront Efficiency

Greater efficiency on the waterfront is a policy
priority for the present Government and was also a priority for its
predecessor. Political argument revolves around the pace and extent
of reform, the effectiveness of the strategies pursued or being
pursued, and, of late, the lawfulness or otherwise of some of the
means adopted by all the stakeholders in seeking to achieve their
ends.

It is beyond the brief of this paper to debate
the claims and counter-claims about the degree to which Australian
container handling is below world best practice and the extent that
any lack of efficiency is caused by an excess of union bargaining
power or other factors. If that were an issue, those other factors
might include: a lack of competition amongst stevedores, excessive
state government charges, poor integration of port and road/rail
facilities, container yard congestion, the pattern of ship
arrivals, and the percentage of each vessel's overall capacity
exchanged at each call.

Readers are invited to form their own
conclusions and may be assisted in doing so by the publications
listed below:

Productivity Commission, Work Arrangements in Container
Stevedoring, April 1998.

Productivity Commission, International Benchmarking of the
Australian Waterfront, April 1998.

Those readers looking for a succinct (albeit
more critical) account of the claims and counter-claims made about
the records of respective federal Governments are directed to Alan
Ramsay's piece, 'The lies of the wharf war', Sydney Morning
Herald, 25 April 1998.

A brief comment piece by Ross Gittins, 'Port
disruption good for trade', Sydney Morning Herald, 4 May
1998 contains material suggesting that a significant but
nonetheless relatively small percentage of trade will be affected
by the dispute - 5 percent of exports and 10 percent of imports. By
implication the effect of wharf inefficiencies on total trade -
imports and exports - needs to be kept in perspective. Gittins
similarly berates some politicians for what he suggests is implying
that increased efficiency will improve the balance of trade. It
need not. In short, 'wharfies' who become more efficient at loading
exports will also become more efficient at unloading imports.

Present Proposals

The proposals advanced as part of the present
package may be considered in three parts, those being:

The present Bills

The Seven Benchmark Objectives announced by the Minister on 8
April 1998

Any guidelines or criteria in relation to specific redundancy
payments that may be made under the scheme.

The Legislation

The legislation is outlined in the Minister's
Second Reading Speech and is described in detail in the Main
Provisions.

In brief, the Minister commits the Commonwealth
to establishing the Maritime Industry Finance Company (MIFCo) as a
wholly owned Commonwealth Company under the Corporations
Law.

MIFCo is a company limited by guarantee and will
administer a loan facility of up to $250 million from financial
institutions which it may then use to pay stevedoring employees
sums equal to their redundancy entitlements.

Funds for the payment of the redundancies are to
be raised over time by a levy on the loading and unloading of
containers and vehicles in Australia. The legislation is described
by the Minister as being modelled on existing stevedoring levy
legislation, the Stevedoring Industry Levy Act 1977 and
the Stevedoring Industry Collection Act 1977.(33)

The levy will not be raised on bulk cargo and
both major stevedores have agreed that the levy at its presently
intended rate ($6 per vehicle and $12 per container loaded or
unloaded) can be absorbed into their existing structure of
charges.

The Commonwealth, via MIFCo, intends funding
redundancies in advance of levy payments and the Bill includes in
proposed section 17 the provision for a special
appropriation allowing the Minister for Workplace Relations and
Small Business to authorise payments that are directly related to
reform or restructuring of stevedoring. The Government also states
that its intention is to wind-up the scheme in six or seven
years.(34)

As at COB 11 May 1998, it appears that the
Government had not announced that it had secured a line of bank
credit for the proposed fund.

Seven Benchmark Objectives

The objectives are detailed in a document issued
on 8 April 1998. To quote from that paper, the objectives in
summary are:

An end to the overmanning and restrictive work practices;

Higher productivity. We have commitments from the major
stevedores to a benchmark of 25 lifts per hour as a national five
port average;

Greater reliability through less industrial disputation and
less interruption through elimination of restrictive work
practices. The level of industrial action on the waterfront should
be no worse, and preferably better, than the national average;

Injury and fatality levels must come back to the all
industries' average or better;

Lower costs throughout the logistics chain of the waterfront
gateway;

A drive to make full effective use of the technology available
to increase productivity and improve ship turnaround times;
and

A Newcastle-based writer, Bob Mills, writing in
the Australian Financial Review, has argued that the
proposed benchmarks are largely meaningless.(36) He further argues
that 4 of the 7 benchmarks are not even benchmarks because they
have no measurable outcomes whilst others are to be calculated
using inappropriate or overly simplified criteria.

Distributing Redundancy Funds

On 23 April 1998, the day that the Full Federal
Court substantially upheld the orders of Justice North, Minister
Reith issued a Media Release indicating that the 1400 MUA
members locked-out by Patrick Operations should not assume that
they would automatically be entitled to redundancy money from the
Government's proposed scheme.

Attached to that release was a letter from the
Secretary of Mr Reith's Department to the Administrators of the
employer companies. Dr Shergold's letter emphasised that funds
would only be available if the expenditure of those funds
contributes to 'genuine waterfront reform'. The letter further
reminded the Administrators that:

The objective is to reduce over-manning,
eliminate inefficient work practices and create genuine competition
on Australian wharves. You will be aware that both Patrick
Stevedores and P&O Ports have committed themselves in writing
to Seven Benchmark Indicators to achieve this end.

In a series of interviews and releases since 23
April 1998, Minister Reith showed a consistency of purpose in
continuing to re-iterate this position. On a number of occasions he
has come close, if indeed he has not done so, to suggesting that
union members presently engaged by Patrick employment companies
ought to be displaced by non unionists.(37) Such a suggestion may
arise because in arguing that non unionists be found a place on the
docks, they presently must almost necessarily displace union
members given the over-supply of labour on the wharves. The only
ways that such a displacement of unionists would not occur is if
some MUA members were to leave the union or there were to be a
significant increase in the number of jobs on the wharfs. If MUA
members were to be dismissed or prejudiced in their employment
simply because of their union affiliation then there would again be
legal argument as to whether the dismissal or disadvantage
constituted a breach of the Workplace Relations Act's freedom of
association provisions.

On 11 May 1998 the Government said that it was
willing to fund waterfront redundancies made by the Administrators
of the four Patrick labour hire companies, but only if strict
conditions were met.

At the time of writing a full text of the
Minister's media release is not available nor is an accompanying
letter again sent by Dr Shergold to the Administrators.

However, the AAP Report states
that:

'The Commonwealth is willing to provide
financial support to any stevedoring employer who needs to reduce
excess labour as part of an industry restructuring and reform
process.'

The conditions for government support of a deed
of company arrangement [see above] are a resolution in favour of
the deed being passed at a meeting of creditors on May 25 and a
ballot of company employees to be held on May 30, seeking their
agreement to cooperate with the deed.

'The Commonwealth would not be willing to
provide financial support in the manner contemplated if any delays
in this timing eventuate or if a majority of employees vote against
cooperation.'

The Commonwealth's intentions become clearer in
the following AAP item which details the requirements that
the Administrators must meet to demonstrate a commitment to the
ideals of competition detailed in the Government benchmarks.

The AAP item recounts, in part,
that:

The government earlier indicated it may not pay
the redundancy money, but the letter [Dr Shergold's (?)] said one
way for the companies to demonstrate competition was to tender for
the most efficient provision of labour on at least some of the
docks.

'On other docks it would need to be shown the
provision of non-stevedoring services 1/4 would be sub-contracted
and awarded to the tenderer offering overall best value for money,'
it said.

'Naturally members of the union could be
employed as part of the outsourced labour arrangements.'

The money was also tied to new workplace
arrangements specifying as goals the government's seven performance
benchmarks to increase productivity on the docks.

'Provided the above mentioned steps are
completed within the 50 day timeframe, the Commonwealth would then
be prepared to contribute the monies required to meet in full the
retrenchment entitlements of those employees who have been made
redundant.'

Mr Reith told reporters the government would be
opposed to measures which maintained a monopoly in breach of the
Workplace Relations Act freedom of association provisions. (38)

Opposition Position

Those opposed to the Government's actions in the
present dispute confront a difficult dilemma in deciding whether or
not to support the proposed legislation.

The legislation provides an apparently secure
basis for providing not ungenerous redundancy packages for members
of the MUA likely to be displaced in the present round of industry
redundancies.

However, the proposed funds now clearly come
with significant strings attached (see above) including agreeing to
waterfront targets which it has been argued by some are unrealistic
and a forced end to the MUA's near labour supply monopoly at many
ports.

The alternative for the MUA and its members is
to pursue the uncertain paths of seeking redundancy monies directly
from the Patrick Group or compensation for unlawful dismissal
through the courts.

Opposition Leader Beazley has described the
legislation as 'endorsing a process of unlawfully sacking
Australian workers for one reason only, and that is that they are
members of a union.'(39)

On the Sunday Program, Mr Beazley
further indicated that the Opposition would be seeking changes to
Corporations Law to prevent persons artificially
restructuring their business arrangements to avoid their lawful
obligations to their employees and other creditors. Mr Beazley has
further indicated that the Bills are likely to be referred to a
Senate Committee for investigation.(40)

Labor Deputy Leader, Gareth Evans, has also
indicated that the ALP will be moving in Parliament for changes to
the Workplace Relations Act, to ensure that companies can't, by
arrangements with subsidiaries, escape their legal
obligations.(41)

At the ALP Caucus meeting held on 11 May 1998,
the Party reportedly voted to defer a decision on whether to
support the Bills, voting instead to refer them to a Senate
Committee.(42)

This is a rather slender Bill as many of the
provisions regulating the affairs of MIFCo form part of other laws
- principally the Corporations Law and the
Commonwealth Authorities and Companies Act 1997. The
latter law contains special provisions relating to the
accountability and reporting requirements of wholly-owned
Commonwealth companies.

It has been reported that a paper being prepared
by two Australian National University academics - Professor Stephen
Bottomley and Dr Nick Seddon - will express some concerns about
certain aspects of the Bill.(43)

The authors apparently suggest that the creation
of MIFCo may be a device for circumventing the requirements of
section 37 of the Financial Management and Accountability Act
1997 which says that the Commonwealth cannot raise money
without legislative authorisation.

Although lines of credit have yet to be
announced, it is, as noted above, apparently the intention of the
Government that MIFCo commence operations before the present Bill
is enacted or at least before levy payments are received.(44) This
may heighten some concerns that the creation of MIFCo as a public
company allows the Commonwealth to perform certain acts that would
otherwise require prior parliamentary approval.

The main provisions of the Bill reflect the
usual requirements of a levy scheme and are in part modelled on
existing laws. The provisions are discussed clearly in the
Explanatory Memorandum and the totality of the scheme itself has
been outlined above.

A number of provisions may attract further
attention.

Clauses 2 and
8 provide that whilst the Act is to commence on
Royal Assent, the levy itself may not be imposed until a notice is
placed in the Gazette. A notice cannot be issued by the
Minister until 2 months after the Bill has been enacted.

Clause 6 sets out the
conditions under which the levy is and is not payable and
clause 7 declares who is responsible for paying
the levy.

The core, and potentially most contentious
provisions, however, are clauses 16 and
17. Subclause 16(1) gives the
Minister explicit power to delegate all or any of his powers under
the Act to a Senior Executive Service Officer in his Department.
Subclause 16(2) likewise gives a largely
unfettered power of delegation to the Secretary of the Department
of Workplace Relations and Small Business.

What may make the power of delegation more
significant in the case of the Minister is the wide powers that the
Minister will enjoy under proposed section 17.

Subclause 17(1) provides the
Minister with a wide discretion to authorise payments that are
directly or indirectly in connection with waterfront reform in the
stevedoring industry. Subclause 17(2) provides a
similarly open-ended capacity to appropriate monies from
consolidated revenue for purposes 'directly or indirectly'
connected with 'the reform or restructuring of the stevedoring
industry'.

The breadth of these discretions would appear to
contemplate a situation where the Minister or his delegate has
unlimited funds to spend in achieving ends which the Minister
determines are ends directly or indirectly connected with
waterfront reform. The capacity of the Parliament to subsequently
challenge or curtail the exercise of such wide discretionary powers
is arguably limited.

Regulatory Impact Statement

The Explanatory Memorandum contains a Regulatory
Impact Statement setting out the arguments for proceeding with the
current legislation rather than operating under the Stevedoring
Industry Finance Committee Act (SIFC) arrangements discussed
above.

The reasons advanced for pursuing the proposed
scheme appear well based and centre on the fact that the old scheme
was largely dismantled (but not fully wound-up) in September 1995.
Moreover, the proposed scheme will apply only to container and
vehicle movements, not to bulk cargo handling.

This does, however, raise a question as to why
the legislation and arrangements supporting the 1977 scheme are
still in place even though levy payments under the scheme were
discontinued in September 1995. The Department of Industrial
Relations Annual Report 1995-96 lists amongst the key
objectives for the Special Service Sub-program the aim of
winding-up SIFC and the abolition of the levy collection
arrangements.(45) This objective apparently has not yet been
met.(46)

Concluding
Comments

Unlawful Conduct ?

The two present Bills that form part of the
Government's waterfront package are connected to a series of events
which have divided the community not so much on the need for
waterfront reform but over the means by which such reform has been
pursued.

The Full Federal Court in handing down its
decision substantially upholding the interlocutory orders of North
J was even moved to begin its judgment with the following:

As individuals, each member of the Bench, like
all sensible Australians, is in favour of an efficient
waterfront...

Their Honours then went on to make a very basic
point about the rule of law in any democracy:

The business of the Court is legality. Just as
it is not unknown in human affairs for a noble objective to be
pursued by ignoble means, so it happens sometimes that desirable
ends are pursued by unlawful means. If the point is taken before
them, courts have to rule on the legality of the means, whatever
view individual judges may have about the desirability of the end.
This is one aspect of the rule of law, a societal value that is at
the heart of our system of government. It follows that this
judgment should be seen only as a judgment about legal issues, not
a view about social, economic and political arguments concerning
waterfront reform management that have dominated the media during
the last couple of weeks.(47)

Hence, it is open for the Government to argue
that in a technical legal sense neither it nor Patrick stevedores
have done anything unlawful.

This claim is of course subject to the hearing
by the Federal Court of the MUA's various substantive claims
against some in the Patrick Group and others, including Minister
Reith, that they have acted unlawfully or as part of an unlawful
conspiracy. Those proceedings are set down for a directions hearing
in late May 1998 and may come to trial by mid-year.

The claims of unlawful behaviour rest on alleged
breaches of the Workplace Relations Act 1996 and the
alleged committal of a number of economic torts by the defendants
in the course of prejudicing the employment of the 1400 MUA members
engaged by the Patrick labour hire companies.

North J found that the MUA had established an
arguable case against the respondents in regard to the conspiracy
and other related claims and that this finding was not found to be
in error by either the Full Federal Court or the High Court.

In related proceedings before Gaudron J in the
High Court on 17 April 1998, Patrick Operations, the NFF, the
Commonwealth and other parties sought to challenge the jurisdiction
of the Federal Court to hear the MUA's allegations regarding
various forms of unlawful action by Patrick and others.(48) Except
in relation to a claim challenging the operation of the
Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic) and
the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth),
the application for special leave to appeal was dismissed. The
judgment ended immediate prosects of the MUA's action against the
above parties in the Federal Court being stopped on technical
jurisdictional grounds.

Her Honour's judgment also usefully sets out the
main causes of action being pursued by the MUA. They are:

that parts of the Patrick Group, the NFF parties, the
Commonwealth and Minister Reith conspired to injure the MUA and
various of its members;

that parts of the Patrick Group, the NFF parties, the
Commonwealth and Minister Reith conspired to injure the MUA and
various of its members by unlawful means;

that parts of the Patrick Group and the NFF parties induced
certain other Patrick parties to breach contracts of employment
with MUA members on whose behalf the action was brought.(49)

The basic elements of these three economic torts
are as follows:

'Simple conspiracy' involves a situation where two or more
persons combine to injure another person by lawful means. The
defence to a charge of simple conspiracy is that the intention to
injure was absent and that the conduct engaged in was to defend the
trade interests of those engaged in the concerted action.

'Unlawful conspiracy' occurs where two or more persons are
shown to have combined to injure another person by the commission
of an unlawful act. In the case of unlawful conspiracy, the
intentions of the conspirators are irrelevant and, as a number of
trade unions have discovered to their cost over the years, lack of
intention to injure does not constitute a defence.

The tort of 'intentional interference with contractual
relations' involves four elements: (a) the defendant must have
knowledge of the contract between the parties; (b) the defendant
intends to prevent the performance of the contract; (c) the
defendant takes direct, or unlawful indirect, action to induce the
third party not to perform the contract, or prevents or hinders
that performance; and (d) the plaintiff suffers damage.(50)

The allegations made by the MUA are, of course,
yet to be tested against the above criteria or the provisions of
the WR Act dealing with unlawful dismissal.

However, there is some limited but interesting
discussion of how the law may be applied in the present cases in
all the decisions of North J and the Full Bench of the High Court.
For example, a useful discussion of how the laws of conspiracy
might conceivably applied in the present instance appears in the
joint judgment of Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ at
pages 18-21.

It will also be recalled that in that joint
judgment their Honours made some pertinent observations about the
substantive allegations to come before the Federal Court,
including:

Orders made in respect of breaches of the unlawful termination
[sic] provisions of the Workplace Relations Act 1996 may
be made against persons other than persons who engaged directly in
conduct contravening the Act.(51)

Although only an employer can engage in conduct contravening
subsection 298K(1) of the Act, all parties to a conspiracy that the
employer companies should engage in such conduct are liable as
concurrent tortfeasors.(52)

If a conspiracy to perform an unlawful act is completed by the
performance of the act, it is only necessary for one of the
conspirators to have performed the act or to have procured the act
to be performed for an action to lie against all the parties to the
act. If damages are recovered each party is liable for the whole
amount.(53)

If the employees were dismissed before trial in contravention
of section 298U(a) of the Act or pursuant to conspiracy in
contravention of that provision, the damages would be likely to be
enormous.(54)

The outcome of the trial before North J will
turn on such questions of law but also on the facts and the
evidence that is able to be presented to the court.

Episodes such as the so called 'Dubai Affair',
which are deliberately not discussed here, may be of relevance in
the conspiracy trial as may the timing and substance of various
communications between the parties. What weight is to be given to
various documents, the timing of various actions such as the
development of legislation and the preparation and circulation of
Departmental briefing papers and minutes is also a matter for the
court and beyond the scope of this brief.

Unwise Behaviour ?

The present Bill forms part of a concerted push
by the Government to secure a series of objectives which may
generically be described as 'waterfront reform'. The proposed
legislation is just one aspect or part of a public policy debate
that has clearly stirred controversy. That push has raised a range
of public policy issues extending beyond the Government's
waterfront reform agenda.

One criticism of the Government's approach is
that it has been too interventionist, another is that the policy
development process has itself been flawed.

In relation to the level of Commonwealth
intervention, the Minister's Second Reading Speech makes it plain
that waterfront reform is an economically important objective and
that direct intervention in establishing a taxpayer guaranteed
redundancy fund is not out of step with past practice and is in the
national interest.

Similarly, the Government would defend the
extensive use of consultancies in preparing its policies,(55) and
its apparent heavier than usual reliance on private sector legal
firms in developing its overall strategy(56) as commensurate with
the importance of the reforms being pursued.

Moreover, it could be argued that the Government
has principally stuck to what it saw as the primary role of
Government in industrial relations, ie setting the framework within
which employers and employees conduct their affairs.(57) For
example, as noted by the Productivity Commission, several
provisions of the Government's Workplace Relations Act limit the
role of unions and aim to encourage greater choice in employee
representation thus making any union monopoly in the supply of
waterfront labour more difficult maintain.(58)

The Government has also argued that court
proceedings are incidental to the main game of waterfront
reform.

Largely from a public policy perspective,
concerns about 'means and ends' have been raised both about the
'Dubai affair' and the Government's apparent relationship with the
Patrick group.

Attention has also focussed on the ethics of
corporate restructures(59) and the reduction in the powers of the
Australian Industrial Relations Commission.(60) To date these, in
varying degrees, remain open questions.

Related concerns about the role of the
Government have not simply been expressed by frequent government
critics such as Ken Davidson of The Age, who has
criticised the policy-making process using the handling of the
Government's waterfront agenda as an example of declining
standards. Davidson's argument is that governments are now
generally less well advised than they once were because, to use one
of his more colourful phrases, '[g]overnments have been converted
into medieval courts and public servants into courtiers.'(61)
Professional and sceptical public service advice is, on this view,
no longer the bulwark that it once was against ministerial caprice
and political adviser-driven adventurism.

Other commentators, including business oriented
journalists such as Terry McCrann,(62) Trevor Sykes(63) and Alan
Kohler(64) have all been either critical or decidedly wary about
the Government's role and the workings of its policy formulation
processes. On the other hand, editorial comment in the major
metropolitan newspapers has been strongly supportive of the overall
thrust of government policy.

Many aspects of the picture are for some time
likely to remain clouded.

For example, it remains something of a mystery
to this writer why, having made compulsory unionism and other union
security devices explicitly unlawful at the federal level in 1996,
the Government apparently has not pursued any actual instances of
alleged MUA intimidation through the courts.(65) The present
approach to 'encouraging' the use of non-union labour seems a
somewhat curious way of attacking any MUA closed shop. It is an
approach that, paradoxically, could result in some workers who have
arguably been pressured into joining the MUA being disadvantaged or
dismissed because of their affiliation with a union that they did
not wish to join.

Public sentiment also appears rather volatile
and at times difficult to fathom. Even public support for the
proposed levy scheme appears divided. A Bulletin poll
suggests that 53 percent of voters are unhappy with federal
government funds being used to assist in the retrenchment of
surplus MUA members.(66)

Public support for legislative action to protect
the interests of workers and creditors generally from the intended
or unintended consequences of corporate collapses and restructures
may, however, produce a rather more positive result.

Maritime Union of Australia & Others v Patrick
Stevedores No.1 Pty Ltd & Others No VG 152 of 1998. Before
North J at page 11. His Honour accepted that the MUA only learned
of the transaction on 8 April 1998.

A substantial argument was put to both the Federal Court and
the High Court that it was neither within the power of the courts,
nor would was it practicable, to effect a workable restoration of
the pre 7 April 1998 position.

The Stevedoring Industry Finance Committee (SIFC) repaid an
AIDC loan facility used to fund redundancy payments under the
Waterfront Industry Reform Program on 17 September 1995 and was to
be wound-up and the relevant legislation repealed. The legislation
has not been repealed and there are apparently some technical
problems to be addressed before SIFC can be terminated.

For more detailed discussion of the economic torts see: Breen
Creighton and Andrew Stewart, Labour Law: an introduction,
second edition, Federation Press, 1994,267-275.

At page 16.

Ibid., 19.

Ibid.

Ibid., 21.

See Alan Ramsay, 'Wharf 'reform': we're paying', Sydney
Morning Herald, 18 April 1998 which with one or two apparently
very minor discrepancies reflects the publicly available material
on the Government's waterfront consultancies over the past two
years.

The Productivity Commission refers specifically to section 298A
(freedom of association), section 189 (modification of the
conveniently belong rule), and section 285 (new right of entry
provisions for union officials) in its report on work arrangements
in container stevedoring, op cit, 148.

'All is not fair in the waterfront war', Weekend
Australian, 18 April 1998, 49-50; and 'Howard's joy-ride with
Scanlon is out of control', Weekend Australian, 25 April
1998, 51 and 54.

'Lang Corporation shares are strictly for heroic',
Australian Financial Review, 18-19 April 1998. Also
interviewed on the Sunday Program (19 April 1998) and
Lateline (22 April 1998) talking about concerns in
relation to the ethics of the exercise.

'Oh what a feeling - pity it won't last', Australian
Financial Review, 9-10 May 1998, 24-25.

Refer Part XA of the WR Act.

AAP, 10 May 1998. Such a result may arguably reflect
some community misunderstanding of how the scheme is to be
funded.

Bob Bennett
12 May 1998
Bills Digest Service
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